14.3 The Business Cycle
1) Which of the following explains the cause of the change in the unemployment rate at the end of a recession?
A) Firms are hesitant to rehire laid off workers as they continue to operate below capacity.
B) Firms rapidly hire new workers at the first sign of on an increase in demand for their goods.
C) Discouraged workers return to the labor force and this makes the unemployment rate fall.
D) Discouraged workers leave the labor force and this makes the unemployment rate rise.
2) During the expansion phase of the business cycle, which of the following eventually increases?
A) production
B) employment
C) income
D) all of the above
3) During the recession phase of the business cycle,
A) production is usually rising.
B) interest rates are usually falling.
C) unemployment is usually falling.
D) income is usually rising.
4) The period between a business cycle peak and a business cycle trough is called
A) expansion.
B) recession.
C) diffusion.
D) recalculation.
5) From 1991 until 2001, the United States was in a period of
A) expansion.
B) recession.
C) business cycle troughs.
D) business cycle peaks.
6) The period of expansion ends with a ________ and the period of recession ends with a ________.
A) business cycle peak; business cycle trough
B) business cycle trough; business cycle peak
C) business cycle peak; business cycle peak
D) business cycle trough; business cycle trough
7) What is the name of the organization that defines business cycle peaks and troughs in the United States?
A) the Bureau of Labor Statistics
B) the Federal Reserve
C) the National Bureau of Economic Research
D) the National Peak and Trough Committee
8) At the end of World War II in 1945, many economists and business managers expected that the U.S. economy would enter a severe recession. At that time, Sears and Montgomery Ward were the two largest department store chains in the country. Sears CEO Robert Wood expected continuing prosperity and opened new stores. Montgomery Ward CEO Sewell Avery expected falling incomes and rising unemployment and closed a number of existing stores. The results of their actions were seen during the late 1940s, when
A) Sears declared bankruptcy and was purchased by Montgomery Ward.
B) Montgomery Ward weathered the economic downturn in better financial shape than Sears.
C) Sears rapidly gained market share at Montgomery Ward’s expense.
D) Sears had to close many of the new stores it had opened following the end of the war.
9) As the economy nears the end of an expansion, which of the following do we typically see?
A) rising firm profits
B) rising levels of firm investment
C) rising interest rates
D) falling wages relative to output prices
10) As the economy nears the end of a recession, which of the following do we typically see?
A) further decreases in consumer spending
B) increased spending on capital goods by firms
C) increasing interest rates
D) all of the above
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